Kovacevich's Delayed Retirement: Bove's Criticism is Totally Off Base

The FT reports that

Richard Kovacevich’s decision to stay on past retirement age at Wells Fargo is drawing fire from some analysts who have a history of praising his tenure as head of the bank.

Not really. The “some analysts” the FT cites is really just one analyst: Ladenburg Thalmann’s irrepressible Dick Bove. Bove often has contrary-minded, thought-provoking things to say. This time, though, he’s just wrong.  

I’ll stipulate up front that corporate suites across America are full of 60-something-year-old egomaniacal bloviators who don’t know when it’s time to step aside and let someone else run things. One of the surest ways for a management team to melt down is to let the ex-CEO stick around and second-guess what the new guy is doing. That’s why mandatory retirement ages are generally a good thing.

But Wells Fargo (WFC) isn’t most companies. It is run by perhaps the most talented executives in the banking industry, who work together with an uncommon level of collegiality. 

And, as it happens, that’s about to come in handy. There’s an awful lot going on at Wells Fargo these days. The Wachovia integration, for one thing. And the ongoing credit crunch. Plus, Wells is one of the few companies in the banking business in a position to materially benefit (assuming it makes the right moves) from the dislocation of its competitors.

Addressing all that would be a mind-boggling management challenge for any individual. (The Wachovia integration alone will be a doozy.)  Happily for Wells, John Stumpf and Dick Kovacevich have known each other and worked well together for years. If Dick Bove thinks the two will get in each other’s way as they move to address these issues, he doesn’t know Wells Fargo as well as he’s been letting on.  

Normally, a chairman overstaying his retirement age would give me pause, too. But not this chairman, at this company, at this particular time.

Comments

[Christopher...:]

Ditto. What is the deal with Dick Bove and the FT? If the CFC BOD wants Dick Kovacevich to stay, he stays. This is one of the best run banks in the world. What is the issue Dick?

I have never understood mandatory retirement rules. People like former Fed Chairman Paul Volcker or former GAO chief Chuck Bowsher are both over the mandatory retirement age for most corps, but I'd have both of them as directors of my firm tomorrow.

2008 Nov 07 08:25 AM

[seabassbanker:]

MAYBE NOW I CAN GET JOB WRITING AT LEMMING BANKSTOCKS WEBSITE...AS YOU CAN SEE MY IDEAS ACTUALLY MAKE MONEY RATHER THAN IDIOCRACY...PS I CARRIED WAY MORE THAN THOSE ORIGINAL 17 INTO WEDNESDAY

LMFAO TOMMY

xxxxxxxxxxxxxxx

Sent: Sat Oct 4 8:30
To:

Bankstocks . com's Tom Brown <tbrown@bankstocks ...

Priority: Normal
Subject:

RE; What analysis have you done?

Type: Attachments

TOMMY I AM NOT KNOW NOTHING SHORT...I am a college student who would be willing to put his results YTD up against ANY HEDGE FUND ON THE PLANET...I do the homework and learn both bull and bear case my man...

here is sampling of my thesis and research on WFC...you can say what you want but i have been watching these sneaky guys for a while...I DO MY HOMEWORK BUDDY AS YOU CAN SEE

----------------------...

for WFC I like the april 35's...I have been accumulating since the friday they banned shorting and have cost of 5

i got fill of 2 at 4.8 friday right at open then upped bid and got filled 17 more at 5

here is a sample of the logic behing WFC

1. changed the way the recognize NPA from 90-180 last Q...180 is the absolute max they can extend...mighty fishy in this environmet + they raised divi (smart???? i think not)

2. have some dodgy CRE loans and that stuff is just starting to crack

3. they have the BUFFETT halo + they say they never did subprime...well check this
my man (notice that many of theses other companies are ZEROS now)...yes their UW standard is arguably better but that is like sayin big mac is better for ya than large fry

----------------------...

Exhibit 8: Top 10 Alt-A Lenders, 2006

Rank Company 2006 YTD MarketShare% Total Orig Vol Alt-A Share%
1 IndyMac $49,620 16.5% $64,000 77.5%
2 Countrywide 47,000 15.7% 333,740 14.1%
3 Wells Fargo 30,050 10.0% 310,890 9.7%
4 Res Funding Corp 29,730 9.9% 66,100 45.0%
5 WMC Mortgage 19,300 6.4% 24,140 80.0%
6 Washington Mutual 19,050 6.4% 153,630 12.4%
7 GreenPoint 12,310 4.1% 27,120 45.4%
8 Aurora Loan Svcs 11,000 3.7% 25,300 43.5%
9 Homecomings 9,980 3.3% 21,660 46.1%
10 First Magnus 9,900 3.3% 22,030 44.9%
Total Top 10 $237,940 79.3% $1,048,610 22.7%
I note that WFC prudently had the lowest Alt-A as a percentage of its total origination.

Exhibit 14: Top Subprime Lenders, 2006

Rank Lender 2006 Market Share (%)
1 Wells Fargo $ 83,221 13.0%
2 HSBC Finance 52,800 8.3%
3 New Century 51,600 8.1%
4 Countrywide Financial 40,596 6.3%
5 CitiMortgage 38,040 5.9%
6 WMC Mortgage 33,157 5.2%
7 Fremont Investment 32,300 5.0%
8 Ameriquest 29,500 4.6%
9 Option One 28,792 4.5%
10 First Franklin 27,666 4.3%
11 Washington Mutual 26,600 4.2%
12 Residential Funding 21,869 3.4%
13 Aegis Mortgage 17,000 2.7%
14 American General 15,070 2.4%
15 Accredited Lenders 15,000 2.3%
Top 15 $ 515,217 80.5%
----------------------...

4. they have 80 bil in HELOC exposure in CA NV that will take big hit

5. LET ME KNOW IF YA WANT SOME MORE BUDDY!!!!!!!!

SO TO SUMMARIZE, DO I THINK THEY ARE ZERO, NO DEFINITLY NOT...ARE THEY OVERVALUED...YOU BETCHA

SO I NOW HAVE ABOUT 25 WFC PG AND WILL WRITE OUT OF MONEY FRONT MONTH LOWER STRIKE CALENDAR SPREADS ON FLUSHES...ALREADY SHORT 5 OCT 29'S FROM 1.05 AVG



I will look to cover in low 20's



PS. DONT REALLY HAVE YEAR LONG HORIZON SORRY...WFC IS THE LONGEST DATED POSITION I HAVE

WHEN SPOO TRADING AT 900 MAYBE I LOOK TO GET LONG--

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On Tue Sep 23 18:01 , Bankstocks.com's Tom Brown sent:

Nice! You articulated your point of view quite well; NOT. What analysis have you done? You have done none is my bet. Email me in a year and let me know how well your investments have performed.



tom



From: xxxxxxxxxxxxxx
Sent: 2008-09-22 12:59
To: Bankstocks.com's Tom Brown
Subject: Suggestions/Comments



Suggestions/Comments:

Mr. Brown I just want to tell you a few things First you are incredibly myopic A financial service hedge fund...LMFAO might as well just buy the bix kre xlf and save the 2-20...face it your a glorified sector etf I saw you on CNBC arguing for a total short sale ban...Have you read no history...do you not understand how a two way market works...as a hedge fund (since that is what you call yourself) I would think you would argue for price discovery, the ability to hedge, and a free, open market I sincerely believe you are barking right up the wrong tree sir I sent you an email in july and when you another bottom in bank and financial stocks...I told you that you have proven to be a great fade in the past and linked article to your calls on sub-prime lenders I stated that I would let the pump burn off and fade you with vigor...Well in the fact that this is zero sum I am content to know that perhaps some of the cash in my account did belong to you Artificial means of propping up a market do not end well Do your homework, do fundamental and macro research AND DO NOT BLAME OTHERS FOR YOUR MYOPIC FAT AND LAZY INVESTMENT STYLE
PS SHORT CALL LONG PUT THANK YOU VERY MUCH CLOWN


xxxxxxxxxx
Finance Student

2008 Nov 07 09:25 AM

[I should know:]

Wells Fargo & Co has a great record for their merger and integration of other banks and financial institutions. When Norwest Bank merged with Wells Fargo, Norwest was the survivor. That merger is considered the best and smoothest mid-sized bank merger in history, masterminded by Dick Kovacevich who was CEO of Norwest at the time. He is still onboard and this merger is his baby. I am sure he will make this his "crowning achievement". Give him time, he has the best management team in the industry!

2008 Nov 07 11:28 AM

[User 68127:]

Tom,

Where have you been, buddy? How did that July "bottom in financials" call work out for you?

2008 Nov 07 02:50 PM

[PlentyOStocks:]

We need a clueless filter on Seeking Alpha.
Tom Browns bottom on call on the banks was on 7/15/2008
This article is on WFC.
WFC's 52 week low was on 7/15.
Bank of America's 52 week low was 7/15
JPM Chase 52 week low was 7/15
There are many more like this.

The rest of the market tanked in October. The banks were already down.
Just because things don't turn around the next day you all start whining.
If you bought the stronger banks as a group on July 15th you would be up today.

I note that those who like to bash Tom have no opinions of their own. What a bunch of cowards.

2008 Nov 09 02:10 PM

[User 68127:]

Um.....the XLF low was $16.77 on 7/15/08 and closed at $17.17. The XLF has since been as low as $12.79--a 24% drop from 7/15. Closing price on 11/10? $13.80! "Whining" aside, that looks like an 18% drop from the intra-day low to me. You can cherry-pick a few names that are higher out of a large universe...that does not make the call right. (BAC is all of a dollar higher now--that's the best you can do?)

2008 Nov 10 04:38 PM

[seabassbanker:]

WFC is one of the last pigs yet to crack...crack this biatch will just as surely as tom brown shuts down hedge fund due to highwater mark looking like MT Everest...as evidenced by his idiotic idea of banning all forms of shorting you know this retard was not hedged, should have never called himself a hedge fund, and is prolly getting killed

sorry tommy but i dont spin it...hey its not your fault, bull market breeds incompetence...bear market breeds evolution...just look at your pal bill miller...

2008 Nov 11 02:57 AM